Business Intelligence ROI

Research the topic of business intelligence ROI, and you’ll find a huge range of estimates. Some promise a whopping 1300-percent return (!), while others vaguely promise “soft benefits,” which means they have no idea.
We can only speak to the issue based on our experience as a small firm of business intelligence consultants. The cost side is fairly straightforward to calculate, and we’re working on a series of posts on how much everything we do costs. (If you’re interested, sign up for the newsletter (see the box to the right), and we’ll keep you posted.)
The question is: What do our clients get in exchange for their investment in us?
And we can say—with absolute certainty—that our clients never hire us for soft benefits. Every time, our clients have reporting issues that need to be solved and solved quickly. Now this doesn’t mean our work always leads to direct savings or increases in...

Use the Tools You Have
The best way to achieve return on investment is to minimize investment. And the best way to minimize investment is to use the tools you already have. Fundamentally, after years of work in this industry using multiple tools and platforms, we believe all the tools out there do the same basic things. Sure, each tool has strengths and weaknesses. But if you’ve already invested in one, it’s really hard to justify switching to another.
We understand our philosophy may disqualify us from your consideration. For example, you may have made a major investment in SAP BusinessObjects. We’ve worked with it in the past, and it’s certainly a powerful tool. But unless you're migrating away from it, we’re not going to work with it.
That said, if you ARE considering different tools, let me explain why we DO support Microsoft BI stack. If you’re a mid-market company, you may...

Use Your General Ledger
When you start down the Business Intelligence road, you’ll often hear people talk about data marts, data warehouses, reporting databases, etc. All these are useful. (See our posts The Data Warehouse Scorecard and Data Warehouse vs. Data Mart: What’s the Difference?) But, if you want to be cost effective, you have to ask, “What do I already have that can give me what I need?” Often, your need is for a central repository.
Fortunately, you already have one: it’s your general ledger. All your systems feed numbers into it. (Granted, you can’t put marketing leads in a ledger, but our focus is on the hard cash associated with them, so the ledger works fine.) As an added bonus, when you use the general ledger it puts an end to the most asked question of any report: “Does this tie to the ledger?” When you start with the ledger,...

Ask: Is Your Data Clean?
Whether you need dashboards, pivots or reports, there’s one thing you need first: Your data must be clean. We all know the phrase “garbage in, garbage out.” What most people don’t understand is that their data—the data they love; the data they prize; the data they’re basing million dollar decisions on—may be garbage.
But maybe you’re different. Maybe you recently installed an ERP system where the setup was consistent and no one entered a strange transaction just to “get it done.” Maybe everyone in your organization agrees what “gross margin” and “contribution margin” mean. Maybe your data quality is good, and you can get started with dashboards, pivots and reports.
But that’s not the world we live in. Just like happy couples don’t go to couples therapy, straightforward businesses don’t need consultants. Our clients often have one or more of the following challenges:
1) Multiple Software Packages—They may have...

Think Reports First
Put broadly, Business Intelligence software creates three kinds of output:
1) Dashboards. Allow executives to “grasp the big picture.” They’re often filled with fancy charts, KPIs, etc.
2) Pivots. Data sets that allow advanced analysts to slice and dice. Generally, pivots resemble the good old Excel Pivot Table.
3) Reports. Detailed listings and reports so people can get their jobs done and see the details they need.
Many of you have probably attended demonstrations of Business Intelligence software. You’ve seen lots of dashboards and charts, many with special colors to show whether your key metrics are “red, yellow or green.” You’ve seen how someone can see a number, ask a question about it, and then drill down to get the answer. You’ve seen how a tool can present all kinds of data to a skilled end user, allowing them to pick and choose. And that’s all wonderful. And at Red Three, we’re...

Users Aren’t Report Writers
Mark Twain said, “There are lies, damned lies and statistics.” He also said, “Your users can write their own reports.” Well, maybe not, but he would have if he’d been a data consultant today.
But seriously, many of you have been involved in the purchase of an ERP or other complex software. You sat through demonstrations. You asked about reports—because you know everyone needs good output to do their jobs and senior management wants nicely printed reports on their desks. When the report you wanted wasn’t there, you were assured it wasn’t a big deal to create it. Heck, even your end-users could become report writers!
Most of you know this isn’t true. Relational databases aren’t brain surgery, but they’re not something your average accountant will get really comfortable with. In our experience, the only exception is if the user is the director of financial systems or he/she is...

You Don't Have Big Data
In previous posts, I wrote about how a financial data consultant differs from a regular data consultant and why it’s important not to oversell financial data projects.
In this post, I want to talk about big data. Because, contrary to what you might believe, you don’t have big data. Most financial executives work with regular data. As financial data consultants, we work with regular data. Even if you have $3 billion in sales and 100,000,000 transactions, it’s still regular data.
Let me explain how big data and regular data differ:
Big data is unstructured. Regular data isn’t.
Let’s use an example. We often start projects with the general ledger. (For more on this topic, see Using the General Ledger as a Data Warehouse.) General ledger transactions have a standard structure. Every record has an accounting string, a posting date, and a currency amount (or maybe several). The consistency...

Don't Oversell
Data is hot. So, as with any trend, folks begin thinking that data is the way to solve their problems. As financial data consultants, this is great.
But while we love the enthusiasm, we want to acknowledge that what we do is rarely transformative in itself. Don’t be oversold. As our data consultants like to say, having good data can keep you from being stupid. But being smart is a whole lot harder.
Here’s why:
1. Past performance is no guarantee of future results.
We hear that disclaimer in mutual fund ads. It’s a cliché, but it’s absolutely true. Things change. For example, in the early 90s, my family’s chain of men’s clothing stores had a mediocre year. Why? Because sweaters, which had been a leading category for years, stopped selling. This impacted the entire clothing industry. Consumer desire changed and suddenly everyone had too many sweaters on hand.
Could a report have told...

The sad fact is that much business intelligence software is really shelfware. Stuff that someone bought once upon a time, but it was never used and instead sits on the (virtual) shelf. Even worse, sometimes people did something with the software, but it gradually fell out of use.
While there can be many reasons for this, the most common is because people purchased the software with only a vague notion of wanting to use data better. There was no specific need to fill. In their “field of dreams,” they heard James Earl Jones: “If we build it, they will come.” But nothing happened.
This came to mind recently when a partner asked us to quote on implementing BusinessObjects for their client. BusinessObjects has lots and lots of pieces. So, the first question we asked was why? What is their client looking for? What are they trying to achieve? Why do they need...

I'm generally a big advocate of making your software go as far as possible, even to the extent of using your general ledger as a simple data warehouse. But sometimes, trying to make your packaged software do everything doesn't yield the best result. Here?s an example:
A client of mine sells their products through wholesale distributors. These distributors are (hopefully) going to start providing my client with information about their products? final customers. Now that my client's sales are going up, tracking this information is becoming ever more important. Their initial plan was to find an ERP system that would allow them to upload all this information. I advised against it, for a few reasons:
1) They can't control the data they?re going to get.
In this case, the distributors are doing them a favor by providing the data. My client only really needs the basics ? customers, quantities, items and (maybe) price....